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Trade Policy

The last 13 presidents of the United States considered trade to be mutually beneficial for their fostering of economic growth and good relations among nations. They aimed to avoid trade wars, reduce barriers, and respect the rules. President Trump has departed from this path, seeing trade as a zero-sum game instead of a win-win proposition. Trump’s views, based on economic fallacies, contradictory objectives, and an unhealthy fixation on manufacturing, will only reduce investment, increase economic uncertainty, and hurt American consumers, argues Daniel Ikenson, Director of the Herbert A. Stiefel Center for Trade Policy Studies.

For nearly 100 years, a federal law known as the Jones Act has restricted water transportation of cargo between U.S. ports to ships that are U.S.-owned, U.S.-crewed, U.S.-registered, and U.S.-built. Justified on national security grounds as a means to bolster the U.S. maritime industry, the unsurprising result of this law has been to impose significant costs on the U.S. economy while providing few of the promised benefits. In a new paper, Cato scholars Colin Grabow, Inu Manak, and Daniel J. Ikenson examine how such an archaic, burdensome law has been able to withstand scrutiny and persist for almost a century, and present a series of options for reforming this archaic law and reducing its costly burdens.

The trade deficit with China has attracted the president’s focus, but it is not the real problem. The greater issue are China’s tariffs, which are much higher than U.S. tariffs. Trump has issued vague demands and raised American tariffs, but this will not induce China to liberalize. The better approach, says Cato scholar Simon Lester, is to follow the model of Mexico and NAFTA. Mexico also had high tariffs, but through joining NAFTA and the WTO, its tariffs virtually disappeared. China has already lowered its tariffs considerably after joining the WTO; following the NAFTA approach, we could negotiate the rest of them away.

In exchange for an end to the U.S. blockade of WTO judicial appointments and U.S. agreement to WTO reforms that reinforce the indispensable independence and impartiality of WTO judges while also strengthening the whole WTO dispute settlement system, the 163 other WTO members should agree to negotiate anew on the true core of U.S. concern – the rules on dumping.

In the wake of the recent “trade agreement” between President Trump and EU Commission President Jean Claude Juncker, we have seen a surfeit of commentary heaping praise on the U.S. president for his strategic trade policy vision and tactical brilliance.

Of Special Note

For decades, the federal government has been operating a program to control the production and importation of sugar. The program’s main purpose is to ensure minimum prices for sugar, typically much higher than those found in international markets. In leading this sugar cartel, Cato scholar Colin Grabow argues in a new paper, the government has raised costs for U.S. consumers and U.S. businesses that use sugar in their products, while making citizens suspicious that their government is actually working for them, instead of advancing the narrow interests of special interest groups, such as sugar producers.

Trade Politics

The President has linked tariffs on aluminum and steel to the North American Free Trade Agreement negotiations, although he has exempted Canada and Mexico for now. Negotiations on a new NAFTA had been looking positive, but linking the trade deal to tariffs could undermine that progress. What is the future of continental free trade? And how should a renegotiated NAFTA be different?

This interactive web site allows users to examine how Congress and its individual members have voted over the years on bills and amendments affecting the freedom of Americans to trade and invest in the global economy. The web site includes votes previously examined in a series of Cato studies published from 1999 through 2005, as well as more recent votes.